“OutKast on Tour” is a classroom resource that enables students to understand the essence of accrual accounting. It covers concert revenue recognition for a band and the corresponding expense recognition for three purchasers of concert tickets.
This problem is designed for use early in the introductory accounting course: after the second chapter for most Accounting Principles textbooks. After completing two chapters, most students understand concepts relating to revenue and expense recognition regarding transactions for which cash transfers (receipts and payments) occur either simultaneous to or after revenue and expense transactions. Using OutKast on Tour enables students to grasp concepts relating to cash transfers that occur prior to revenue and expense recognition. This serves as a foundation for understanding prepaid expenses, unearned revenues, adjusting entries, and other accrual accounting issues (that are covered in the third chapter of most Accounting Principles textbooks). Students learn the following fundamental concept: under accrual accounting: the timing of revenues and expense recognition is not dependent on the receipt of cash (for revenues) or payment of cash (for expenses).
This article is from the Accounting Instructors’ Report, an electronic journal that provides teaching tips and insights to those who teach accounting and other business courses.
Daniel J. Jones, Assumption College